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tv   Today in Washington  CSPAN  April 27, 2010 2:00am-6:00am EDT

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employer would be subject to a penalty of $3,000 for that employee. the only other thing to keep in mind is we're talking about full-time employees. in most cases, they only know what they paid the employee, so they do not know what their total household income is. they will have a notice responsibility to tell employers about the availability of coverage in the exchange and the availability of premium tax credits in the exchange and i am assuming this notice requirement will require you to give you some examples if the income from your total household is above this amount -- you along qualified for premium tax credits. if it is below a certain amount, this is how much of a premium tax credit you would qualify for. employees would be able to go to
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the exchange and say this is my household income and this is how much i have to pay for employer- sponsored coverage. it's going to be affordable because it will cost more than 9.5% that of my income. the exchange would certify that pan informed the employer that they are responsible for paying a penalty. the basic obligation is to keep affordable as far as the 9.5% threshold. as far as the deductible question, i do not think we know yet because one of the really important issues that will be determined by the secretary when they define the essential benefit package will be what the level of deductible would be. >> i thought it was a cap on the deductible level for single
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policy of $3,000 or $4,000 for a family. that is my understanding. >> i would like to follow up on a point about maryland. the anticipate states will get their exchanges up and running before 2014? >> and its possible. the only states right now with the exchanges are massachusetts and utah. they will have to be certified at some level for the subsidies to flow through -- which is another question on how many can
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have subsidies flowing to the state. i ask the commissioners and they assume it will start before 2014, possibly 2013, but they do not see any activity before that. >> is kind of a more academic question for larger employer groups because they will mollify to participate in the health insurance exchange if you have more than 50 employees or if the state defines that at 2100. at the discretion to allow groups to participate in the exchange. any employer that has more than that will not be permitted to offer insurance through the exchange trader question is well taken. there are 48 states to go and there is a pretty good blueprint for what a qualifying the exchange would have to look
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like. that requires action in state legislative bodies throughout the country now, so there will be a big push for a state law to come in with these requirements. >> it seems like u.s. pressure building in a few areas where companies are being told they'll have to lower the cost of these plans for employees, yet this scope of the plant is expected at some level to be higher quality plan. how do you see cost pressures building in small companies and how you think they deal with it? >> i was looking last night at the report bruce talked about earlier. it looks like they are going to lose a million out of employer-
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sponsored insurance at the end. it looks like people will switch over to medicaid and the exchange. there are different triggers attached now and people were can -- and where people can get coverage. i think the cost pressures are always there, particularly for small employers. particularly for the rate spikes a of seen and it could potentially make them drop. most typically, for us, we see them move that deductible around to retain the coverage. i think you are going to see a lot of concern and probably more retaining the grandfather plan as opposed to changing. that's probably going to be a discussion between the employer and their agent a utilizing today on what their options are. it is not typical, like a large
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employer with a january 1st. i think the uncertainty is there and cost pressures are probably going to go up. it is possible we're going to continue to see a drop in small employers. that said, the individual mandate is going to pressure on employers to offer coverage and to the extent that makes the rates go up and is sustainable for the employer from a bottom line perspective -- because these are pocketbook issues for employers -- they either have the money or they doubt. they will shed a worker of the need to retain coverage or not hire. there is no money pot. we just don't know yet the full scope of what we're going to see in the next three to six years. >> there is a question about the
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dependent kids up to age 26. can 26-year-old dependents be offered cobra? >> the question is whether employers could be [inaudible] on the effective date. it begins six months after the date of enactment. one of the unanswered questions is if you do offer coverage, how the price the coverage for the employee? if i am the parent and i want to add my 24-year-old, do they come on to the plan at the same premium otherwise for family coverage or does it work the way it does in many states where they have had similar
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requirements, where the employer or insurer can create a separate rate for the coverage offered to that individual. you could have a rate that would be equivalent of a cobra rate -- what would it cost for coverage provided to a 24-26 year-old or a 21-26 year-old individual? that is an unanswered question. there is not any thing in the legislation that prohibits their being a separate rate created just for adding the adult child onto family coverage. also does not say the rate must be the same as the family rate. i think that is one of those unanswered questions we will be
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looking for further guidance on. >> which employer pays the penalty for two working spouses? >> if both spouses are working more than 30 hours a week, they're both required to have the opportunity to enroll in minimum essential coverage. both employers would have that responsibility and both looked at -- both would pay a penalty if they did not provide coverage to those workers. it's not done on a spousal basis, it is whether the individuals working more than 30 hours a week. >> how often must employers calculate full-time equivalents considering those employers to ramp up with seasonal workers?
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>> that's a good question. the actual obligation over the $2,000 penalty and $3,000 penalty, while we talk about them that way, they are assessed to an employer on a monthly basis. one of the questions -- this is one for guidance -- how often does the employer determine if they have more than 50 employees because they're subject to penalties not on a calendar basis, but each month. for people that have a employees that fluctuate around at and fit the magic employee mark, this could be their confusing if sometimes they're depending on how they account
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seasonal workers or the influx of workers to take on a search of work that occurs in their schedule which occurs only at certain times of the year. they have more than 50 employees and other times they would not. it is possible that this calculation could be made numerous times during the year. >> we interpreted it as a monthly, the same way paul did. certainly more guidance is needed and seasonal workers are exempt, aren't they? we have gone back and forth on that. >> only certain categories of seasonal workers. the legislation says the only individuals that are seasonal workers who worked during the holiday season are not included in the calculation of whether you have more than 50 employees. some employers don't bring on seasonal workers just for
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holidays, but because the need for seasonal workers related to other factors other than just the holiday season. i believe the legislation says for those people you bring on just for a short time, if they are working more than 30 hours a week on a monthly basis, that they be required to offer health insurance coverage just like anyone else. >> somebody from jetblue has a question and wants to address the underlying question of health-care costs. does the bill provided the specific tools are programs that can be used to reconnect employees to the true cost of health care? >> i think there were a lot of those, we would all be much happier. there would be of more people satisfied with the legislation. it's also the criticism of the
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massachusetts law. the coverage requirements came first, the cost requirements will be the things we will continue to struggle with overtime. there are few things that help. one of those we considered it important is it allows employers to provide stronger incentives for participating in employer- sponsored well as programs. all right now, under regulations, you can only very premiums are cost sharing by as much as 20%. in wellness programs, it gives a little more flexibility, allowing for a variation of up to 30%. i mentioned briefly there is comparative effectiveness research that will be underway very shortly. a new infusion of funding for that purpose in the legislation
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and there is a new quality measures for performance of health-care providers and services already used in medicare now, but will be increased under the legislation. that is important because while it only apply it to medicare, they are the 800 pound gorilla, the biggest player in the system. some of those practices are likely to be picked give us better tools at individuals when we have the ability to choose between health-care providers and services to make more intelligent and there is some of that. it is certainly not as robust as i think a lot of us would like. >> if you are going to tip your
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hat at individual responsibility and relate engaging individuals, you are going to have to get a system of true individually-purchase policies. for too long, employees have taken a backseat approach to insurance. what we are seeing now is more money coming out of the coffin of the zero employees and more concern about where it -- out of the pocket of the employee and more concerned about where it is going very get i think is designed to address the system and how did thug and shock ended more efficiently. -- how people can shop in it more efficiently, along with some of the wellness and prevention aspect of its theory of the individuals gain more from the system than they would expect -- prevention aspect of it. the individuals gain more from the system than they would
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expect in the past. i think the inertia of the individual mandate is going to drive more interest of whip of my getting for my dollar, because there is of -- what am i getting for my dollar, because there is a penalty if they do not have it, so i think it is the back and then we will wrap up with an e-mail question. >> thank you. i represent clarion health systems. how do you think drafters were planning on hsa's? where they encouraging a more was some of the language in the bill be more discouraging? i think it plays out of with a recent conversation with personal response ability. >> i will let paul elaborate more on that.
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it collapsed on the ability to utilize more consumer-based products. with the limitations on deductibles, the total out of pocket cost, all of the first dollar coverage now being required -- not that carriers are not going that way anyway, but i just don't think it incentivize is it much. at the end of the day, it's a cost comparison for our employers -- what is less expensive? tonight maintain the coverage and what are my options? if they require these plans to cover x, y, and see, i'm not sure there will be there long term. i'm not sure you can put anything in these pretexts accounts anything, s -- into anything, so the direction is opposite for me. >> for me, it's more of a mixed picture. there wasn't any language in the legislation that specifically says cannot offer hsa's, or high
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deductible health coverage. there was a provision that says a few do use and hsa for non- qualified medical expenses, you'll pay a higher penalty for using the funds for something they weren't entitled to it. there is also a change for using them for the reimbursement of over-the-counter drugs, and that is also restricted. those are pretty modest changes, but the bigger picture issue is as they translate this benefit package into the specifics, are there any regulatory requirements in the translation that will be in conflict with the standards that apply for hsa's, for high deductible health plans. there's nothing that requires
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that results and we would certainly hope in the translation of the legislation that nothing interferes in the future with being able to offer that type of benefit package. the other important provisions have to keep in mind is what every offer has to deliver at least a 60% value in terms of the coverage. while i am no actuary, the actuaries say most high deductible health plans to date would well exceed that amount, so presumably if they keep that in mind as they develop the benefit package, as% payout in aggregate that they would be built to comply with that provision as well. >> no panel discussion would be complete without [inaudible]
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how will the arisa plans be affected by the rules given by the office of management and budget redefining welfare plans? >> the department of labor has sent a rule over to the office of management and budget which has not yet been published. so we don't know what tenet. -- we don't know what's in it. in the case where the coverages provided by a government entity, a state or local government, to a non-government employee -- if you think about that, that would describe this that they have in
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the city of san francisco, where they have created a government sponsored plan but it is available to non-government employees within san francisco and would find that as not being an employee welfare plan. that has important implications because of that the case, many other cities or states could do the same thing and it would not be prohibited. you could end up with cities and states the saying they could do it and would undercut the purpose that congress created the uniform from work available. we think employers' average -- we think employees -- employers
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have urged me what office of management and budget and that should be withdrawn because the president has just signed a major new piece of health-care legislation, the first order of importance is to interpret that law and make sure it is implemented properly before we add anything that would have any ambiguity with the laws currently in effect that employers have been relying on for over 30 years when they offer coverage to their employees. we think the time for that proposal has come and gone. instead of issuing that rule, they will do the things to provide guidance and all of the questions being asked today about the legislation the president assigned. >> thank you very much to amanda and paul the venture lots of questions and left us with the
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attending are many questions we cannot understand now and will be asking for a least a decade. thank you very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> we're going to answer those questions in the next 10 minutes. >> my name is randy johnson and i had the privilege of working on capitol hill when the clinton health care bill went up and, testified in the senate before the health committee and house ways and means committee on the present legislation. in spite of that, i always remain confused as to what the impact of this legislation will be. i think we will short -- will sort through this as this
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paneling clear, for some time to come. the consultants and lawyers would return this deal. in that case, it's good for one part of the industry in this country. a lot has come out already, 10 pages summaries of what will happen and the time deadlines we have to me. in a year from now, we will seek treaties come out in the 500 page range. so hopefully we did this with that 40-page primer you have an affront to be. we will be issuing a more formal version in a couple of weeks. to put that together, i made a decision to hire someone i knew for several years that as banking on health care area for some time. he spent many years on capitol hill working in the health care area and is the executive
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director of the health i.t. coalition. i think you will find that filling in the gap between not enough information and too much information. with that, i will turn it over to him and we look forward to your comments. >> thank you. they gave me be enviable task of going through a 2700 page bill in 10 minutes. so i would like to thank the chamber. i would also like to thank my staff for helping to put this primer together. it should be in front of you. it's a little less than 40 pages and it's an attempt to break down the issues that are of critical importance to employers and easily understood language. hopefully with some references and source material that you can go back and take a look at. because we focused on very specific questions about of the law, i thought we would take a
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step back and talk about some broader themes -- take a step down into the weeds and talk about specific examples, and then take a step back to talk about some of the issues coming up this year. hopefully you will not get nauseous in our step back, step forward, and step back. i have had that happen in some presentations recently. it's okay to laugh. it is important to note that the law does largely address some coverage issues and it is not very robust in the cost- reduction area. that was one of the last questions we had come up. i think that is for several reasons. one of the most important is with these mandated benefit packages on some insurance policies, consumers become less sensitive to cost and the effects of the benefit mandates in this bill act as novocain on price sensitivity to consumers.
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there was a memo that came out at the end of last week that said more than anything, that utilization of health services is going to drive up costs fairly significantly. it talks about on the order of somewhere around two under $20 billion. the revised memo is somewhere in the area of $300 billion trade that the major factor in the cost equation. constraints apply -- doctors and hospitals available to treat the newly-covered and formally -- formerly uninsured, means that supply and demand are not equaling out and providers will have a better negotiating lever to negotiate higher reimbursement rates from health plans. one issue that is absolutely critical, because there is a large expansion of medicaid as part of this law, reductions in public plan reimbursement will do a cost shift onto private plans, including employers.
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there was an estimate released last week that showed about $65 billion would be cost shifted onto private plans which means employers and insurers would be faced with raising rates and consumers would be faced with more expensive health coverage. the combination of those three things is going to mean that employers are going to be looking at more robust packages, but more expensive packages. so the desire to get costs under control here is critically important. the second point i would make is we are moving away from a more flexible, nimble environment for employers to provide employee benefits to a much more structured and punitive environment. you have heard a lot of those issues here -- employers are going to be on the hook for about $52 billion in penalties for not offering affordable
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health care coverage. that is a very real cost to employers in this country. in addition, 7.3 million individuals will end up paying a penalty for not getting individual coverage as required by law. that's a very real burden by families and individuals. one of the issues that was talked about a little bit -- the excise tax -- excise tax on high-cost insurance plans -- these are known as the cadillac policies, very robust packages of benefits. about 26.7 million people will be subject to that high-cost 40% excise tax -- excise tax beginning in 2018. with the joint economic committee has estimated is your average family plan premium would be subject to the high cost excise tax --
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the average family plan policy is subject to this tax. the last point i would make is the this bill relies on interesting finance mechanisms vary and -- mechanisms very good about half of the new revenues are made of rigid mechanisms. about half of the new revenues are made up of about $2.5 billion and a new 3.8% investment tax, and that is a tax on labor and capital, and in general economics when you tax things you get less of them, but they become more expensive, so i think we conceal labor cost would improve. capital formation would become more scarce for smaller engines, which means engines of job creation and growth are going to be slowed down, and that as a
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captive starts in 2013, -- that starts in 2013. who actually, because he has five part-time employees, actually did the threshold, because of said to the mandate. if he does it offer the coverage, he will pay a penalty, so he is going to think long and
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hard before hiring those workers and stay below 500 employees, and those economic decisions are going to be made across the economy, and if you are considering not hiring as many part-time workers and lowering full-time workers, it could have an economic impact on job growth or creation in this economy. other example that i would like to highlight, on page 10, is a decision that a lot of employers will start to think about, particularly in the later years. the calculation of whether to offer coverage or to drop coverage. we thought it was important to include. this is an example of a company located just outside of philadelphia, 55 workers, and currently the company pays $600,000 in health care benefits to every year for their employees and families.
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under the new law, if they dropped their coverage, they would be assessed a penalty if someone went into an exchange and got a tax credit. that penalty would be equal to $50,000 a year. so the economic decision before the employer is, do i continue to do the right thing and provide benefits for my employees, or do i drop, knowing that they can get into an exchange, and pay only $50,000 a year? as you go through the primer, one particular section which picks up many pages is the section on taxes and revenues. lots of interesting items in here. one thing you have already heard
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about, small employer tax credit. this is something that is critical to a lot of people, because small employers are the ones hardest hit by these increases in medical care. it is important to note -- amanda thought about this little bit -- the folks available for this credit for are severely constrained. you have to be below that employee threshold, below the $50,000 average wage cap, and you have to wait the entire year to claim the credit. these are significant hurdles for small businesses. it will be interesting to see how many of them actually take this up. the small business tax credit is also not sold to private.
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that is about 70% of small businesses in america. it will be interesting to see how robust that small business tax credit is. obviously, this is a category of folks that are prevalent on a daily, real basis. -- struggling on a daily, real basis. we tried to highlight areas of concern. we did not get to everything, we could not, in the 30-page document. for the immediate regulatory issues that need to be held this year, you have heard it before. this grandfather plan is huge. right now and employers are frozen in their benefit designs, cost sharing responsibilities, deductibles, so they're absolutely needs to
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be clarity. in addition, medical loss ratio will need to be defined. ali, they are very broadly defined. my personal hope, view here, fraud and abuse programs, programs to prevent that, care programs, should be defined as medical care benefits. if they are considered outside of your benefit dollars, it would hurt you. if you do not reach 80% in the small market, you have to start paying rebates to consumers in 2011. one thing that we have not
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talked about, within 90 days, initial internet portal, compare planned. we hope that is robust, that it provides a lot of information, so that consumers can really comparison shop, not just on prices, but on disease management, wellness care. one last thing on small business credit. it will be critical -- the owner will be included or excluded from the calculation of the average wage. it included, it means a lot of small businesses will not qualify for the credit. again, this primer does not catch everything. as you have heard, there are lots of questions, and hopefully, we will start to be able to get some better answers. thank you. [applause]
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>> we want to be mindful of all your time today. thank you for joining us. special thanks for everyone who provided insight today, as well as all of you participating online and this important process. we will continue to be active in this process, moving forward, over the next decade in full implementation of this bill, and will be working to improve it and making changes to make it better for everyone involved, especially from the employer /employee perspective. there are a number of ways that we will do that, all of which include advocacy and your involvement in the process. so thank you for joining us today. we look forward to continuing to work with you in the coming
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months and years. [applause] ⌞&÷&÷ç7 >> tomorrow, we will get an update on the financial regulations bill. after that, shawn dubravac talk about job growth and the economy. later, kathryn gerlach joins us
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for a conversation on nuclear energy with our student cam prizewinners. >> sunday, pat buchanan on conservative ideology in today's hall of the " climate. he will take your calls, e- mails, -- in today's boey the good climate. he will take your calls, e- mails, and weeds. british elections will be held on may 6. -- he will take your calls, e- mails, and tweets. british elections will be held on may 6. we will hear from gordon brown. >> i wanted to rise to speak on this bill also.
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this is such a complex piece of legislation. understandable because there is so much technical -- so much of a technical aspect to the bill, but let's start with the purpose, what i believe our purposes should be. our purpose would be, one, to do as much as we can to build a regulatory regime which will reduce the potential for another event, the type of which we had in the end of 2008 where we had a massive breakdown in the system, financial system of this country, and as a result of huge systemic risks being built into the system which wasn't properly regulated and certainly was not handled correctly by either the financial institutions or by the congress. congress maintains a fairly significant responsibility for the meltdown that occurred at the end of 2008 for the policies that we had running up to that period in the area of housing.
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that should be our first goal. prospectively, trying to reduce systemic risk as much as possible in the system through putting in place policies which will do that and accomplish that. the second goal should, however, be that we maintain what is a unique and really rare strength which america has, which is that we have the capacity as a country to create capital and credit in a very aggressive way so that entrepreneurs who are willing to go out and take risks have access to capital and credit, and that creates jobs and that creates the dynamics of our economy. and we shouldn't put in place a regulatory regime that overly reacts and, as a result, significantly dampens our capacity to have the most vibrant capital and credit markets in the world while still having a safe capital and credit -- safe and sound capital
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credit markets. now, the bill that the senator from connecticut is bringing forward, i presume, is going to have a lot of different sections in it. i just want to focus on one, because it's become the point of significant attention and that's the derivatives section. derivatives are extraordinarily complex instruments and there are a lot of different variations of derivatives. they're basically insurance policies on underlying product that is occurring somewhere in the economy. and their notional value is almost staggering. $600 trillion of notional value out there in derivatives, which is just a number that nobody can comprehend, but you can understand it's a pretty big issue. notional value means, of course, that if everything were to go wrong at the same time, you'd have $600 trillion of insurance sitting out there that had to be paid off. that's not obviously ever going to happen, but the fact is it shows the size of this market and what its implications are.
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and all sorts of different elements in this market. and it's one monolithic market. its not even a hundred, it's thousands, tens of thousands of different and various things that are being -- having derivatives run -- written against them, although they divide into pretty understandable categories. within the bill that came out of the agriculture committee, there was a, well, for lack of a better word, an antipathy expressed towards the entities which presently manage the derivatives markets in this country, which are essentially the large financial house there was an equal antipathy expressed to the entities that use these derivatives, including large amounts of manufacturing companies in this country, people who are dealing with financial debt instruments in this country, people dealing with the housing markets in this country.
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it was almost as if somebody sat back and said, we really dislike these folks, and we're going to put in a regime that will gratuitously penalize them for the business they do because we do not like it. it is too big, too complicated, and i think the people who wrote it felt it was not understandable, so they decided to put forward proposals which fundamentally underline the capacity of derivatives in this country. is that bad? yes, because derivatives are used for the purpose of making commerce work in our nation, for making it possible for people to borrow money, for making it possible for companies to sell overseas, making it possible for people to put a product in the stream of commerce and resume when they enter into an agreement on the product, the press will not be affected by
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extraneous events. get the derivatives language right. now, there needs to be a significant and new look at the regulatory regime of derivatives. and the essence of the exercise should be transparency, maintaining adequate capital for the counterparties and margins, liquidity. that should be where we focus our energy. trying to make sure that the different derivatives that are brought to the market are as transparent as possible and also have behind them the support they need in the form of collateral, capital and margin to, if something goes wrong, be paid off, for lack of a better word. this proposal, however, as it came out of the agriculture committee, doesn't try to accomplish that. rather, it tries to essentially
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eviscerate the use of derivatives as products amongst a large segment of our economy. it sets up something called section 106, where it essentially says that the people who are doing derivatives today, which are for the most part large financial houses, must spin those products off from their financial houses. now, that sounds in concept like a reasonable idea, especially if you were in argentina in 1950 and working for the peron government. but as a very practical matter, it's a concept which will do fundamental harm to the vitality of our economy. why? because you won't have a lot of derivative products in this country that will be able to pass the test of being spun off. you don't have to listen to me to believe this. let me just quote from a message that was sent to us by the federal reserve, which is reasonably fair arbiter in this exercise. they -- they really don't have a dog in this fight other than financial stability of our
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country. section 106 -- this is the fed talking, not me -- "would impair financial stability and strong prudential regulations of derivatives, would have serious consequences for the competitiveness of the united states financial institutions, and would be highly disruptive and costly, both for banks and their customers." that's about as accurate and succinct statement as to what the affect of this section would be as i could have said. i didn't say it. nobody would probably believe me. the fed said it, the fair arbiter said it. now, why did they say that? well, it's pretty obvious, if you know anything about the way these products work, but essentially if you spin off these products, you're going to have to create entities out there to replicate the entities that they were spun off of. so if a large financial institution is now doing derivatives and you spin the derivatives desk off, the swap
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desk off from that financial entity, that spun-off event is going to have to replicate the capital structure of the financial institution which was basically underpinning the derivatives desk. and so that capital structure is estimated to be somewhere in the vicinity of a quarter of a billion -- a quarter of a trillion dollars to half a trillion dollars. of capital will have to be created. well, what's the affect of that? when you start putting capital like that into the system, that capital comes from somewhere, assuming it comes at all, it comes from somewhere. and where it comes from, quite honestly, is the credit worthiness of other activity. it's not new capital. it's taking capital and recreating an event, a freestanding entity here, which
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capital isn't around. it also will mean that there will be a contraction -- and this is an estimate not of the fed but of the group of entities that actually do this business and, therefore, it can be called suspect, but i think it's in the ballpark. it will take a couple hundred billion dollars. it will also cause a contraction of about $700 billion in credit in this country, to say nothing of the fact that if you're looking for a derivatives contract and you can't go to the financial houses that usually do it in the united states and you're a commercial entity or a hedging group, you're going to go overseas and do it because they aren't going to have these types of restrictions. and you're going to be able to buy that contract in singapore. so a large amount of entities, a large amount of business will move offshore almost immediately upon the passage of this bill should this section be kept in.
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and is it necessary, is the question. is it necessary to make the derivatives market work right in this country? absolutely not. this is just punitive language put in out of spite because there is a movement in this country and in this congress, unfortunately, which i call partnering populism -- pandering populism, which just simply dislikes anything that has to do with wall street -- sure, they did a lot of things wrong and they caused a lot of problems -- but if you're going to apply the problems that occurred here fairly, we should be looking in the mirror at ourselves for a lot of things that happened in the economy, by forcing things on a housing market that couldn't sustain it. it's just penal. that's the purpose of this, punitive. and in the end it's going to cut off our nose to spite our face because our -- it will be our credit that contracts and it will be our business -- and
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business can be done and could be done in a very effective way here in the united states overseas. what should be done here, what should be done rather than this exercise, as the fed has said, in causing a highly disruptive and costly effect on banks and their customers and having serious consequences on the competitiveness of the united states? remember, we are competing in the world. that may have escaped -- escaped the attention of the agriculture committee when they wrote this language, but we are in a world competition on the -- derivatives are not a unique american product. they are a world product. so these are jobs that go overseas, this is credit that goes overseas, this is business that goes overseas, this is main street that will be affected by this language. how should it have been done? well, it should have been done in a rational way, not in a punitive way. we know that the derivatives market was not transparent enough. we know that there was not enough capital, liquidity, margin, whatever you want to call it, behind the products and
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the counterparties that were exchanging products in the derivatives markets in the over-the-counter system. we know, because we got a.i.g. as example number one, that a tremendous amount of c.d.s.'s especial remember being written with nothing behind them except a name -- especially being written with nothing behind them except a name. we can fix all that and it can be fixed in a way that almost everybody is comfortable with by, first, making sure that only the exempted products from going to a clearinghouse are products which have a specific commercial use and are customized and are narrow. and that the people doing those products are not large enough in their business so that there are systemic issues. secondly, we put everybody else on a clearinghouse. what's a clearinghouse mean? well, it essentially means there will be a third party insurer,
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or holder, of the basket of assets necessary to support the derivatives contracts. so that we are fairly confident that when a trade is made on a clearinghouse, the counterparties have the liquidity and the margin behind their positions to support their trades. at the same time, the clearinghouse itself must be structured in a way that it has adequate capital. and where's that capital going to come from? it can only come from one place, really, it comes from the people who trade in these instruments. they're going to have to put up the capital. and the regulators -- s.e.c., cftc -- will have direct access to controlling and making sure that that capital is adequate in the clearinghouses and making sure that the clearinghouses are adequately monitoring the contracts. and then as the contracts become more standardized -- and they
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will and they can, we all accept that -- they move over to exchanges, where they're basically traded like stock and then you've taken -- then you have absolute transparency, price disclosure and you -- you don't have the issue -- issues of the over-the-counter market that caused so much problems for us. and that will happen. that will happen almost naturally, but you could have the regulator stand up and say, well, we think this group of derivatives is standardized enough and you've got to move it to an exchange. we could give that power to the regulators. that makes sense. but it would happen naturally anyway as we moved on to -- as these clearinghouses become more effective and standardizing the products and people become more comfortable with standardized products in these areas. and, of course, there would have to be realtime disclosure to the regulators of what the prices were if they are o.t.c. prices or clearinghouse prices so that
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they know what's going on. and then it would be up to the regulators to decide when that information should be disclosed to the markets, depending on how you make these markets. sometimes you can't disclose information immediately, otherwise you wouldn't be able to make a market, otherwise you wouldn't be able to do the contracts and, therefore, you wouldn't be able to do the business which underlies the need for the derivative. so all of that could be done. all of that could be done, and it does not require creating this entity or these series of entities out there which the federal reserve has described as impairing the financial stability and strong prudential regulation of derivatives. in other words, what the federal reserve is saying is that when you go the direction of what is being proposed in the agriculture committee in the area of derivatives and set up this independent swap desk, you're not making things stronger in our financial
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structure. you're making them weaker. you're significantly reducing the strength of the regulatory arms that guide the derivatives or oversee derivatives, and you're also, as imansed earlier, creating -- as i mentioned earlier, creating an almost guaranteed-to-fail situation with regard to the need for capital to support these transitions. it's just -- it just makes no sense at all. you know, to begin with, derivatives are, by definition, a bank product, sod idea that they have to be spun out of banks and financial institutions is on its face absurd. really absurd. and just counterproductive to the whole purpose of doing derivatives, which are very important. you know, the congress recognizes that. in gramm-leech-bliley, we call
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derivatives a bank product. we understand that then. we seem to have forgotton now. you know, i have real estate been trying to figure out what's behind this type of language, because it's so destructive to our competitiveness as a nation, really. i mean, this is the type of thing, as i said earlier, you would have seen in argentine tha--argentina in the 1950's, an tashing on entities simply because they're large and because obviously there's a populous feeling against them. winds up, by the way, significantly -- which ends up, by the way, significantly affecting mainstream in a negative way. look at a argentina, in 1945 -- 1937, somewhere in that period, they were the seventh-best economy in the world. now they're like 54th or something. it is because of this populous
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movement which has driven basically their ability to be competitive offshore. so now we have this huge populous movement here. i'm trying to think, what really is the rationale here other than just rampant pandering populism? a vote occurred in the budget committee last week, which i happen for ranking member on, which crystallized the situation for me. senator sanders from vermont, who i consider a friend and i enjoy immensely, a great guy, a great sense of humor -- but we disagree son a lost thifntle he runs as a social iflt. i run as a conservative. senator sanders offered an amendment which said that the government -- the government would be four or five people down ototreasury or three or four people down oto-- i don't know where they'd be, some new office somewhere -- has the right to break up large corporations. didn't say "break up large corporations which had
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problems." which had overextended themselves, which everybody agrees should happen. that's what senator warner was talking about. he's done extraordinary work in this area, and i'm eelly supportive of his -- and i'm rulely support of it of his efforts in resolution thomplet where if a big bank, a big financial house or big entity gets into trouble, they've overextended themselves, they're essentially insolvent, they get broken up. there's no -- the taxpayers do not come in, in any way, shape, or manner, and support that entity. that's what the warner-corker language does. i believe the senator from connecticut has tried to incorporate a lot amount of that. that should be our policy. but what the sanders amendment said was that any bank, any financial house could be broken up simply because it was deemed to be "big." no matter how resilient or strong it is, no matter if it is
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a major player for our nation and being more competitively internationally -- remember when an american company goes overseas, they want to use an american bank. they don't want to have to use the credit suisse or the bank of singapore. they want to use it an american bank to follow them around the world. those banks have to be pretty big to do that. this language would have said, no matter how strong and profitable you are and how much -- how robust you are, how much you contribute to the american financial system -- we need large financial institutions that can support very complex, sophisticated international activity and come to stuck economic activity -- that they would be broken up because a group of people here in washington didn't like them for social policy, social justice
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reasons. they didn't lend enough men to some group that they wanted to lend to. or they lent too much money to some group they didn't want money lent to. for social reasons we'll break up this company even though this is strong and fiscally responsible. that was the policy proposed in the budget committee. ten people voted for that policy. ten. ten out 2692 people who voted volted for thavoted for that po. where does that stop? where does that stop in where does this section 106 stop? do we break up wail mat because they're not union? do we break up mcdonald's because they sell foods that some people think makes you too fat? do we break up coca-cola because they have too much sugar in their products? is there anything in this country that gets broken up because there is an attitude that big is bad, whether it
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contributes or not, unless you happen to be big and union, in which case you get saved, as the u.a.w. was able to work out for g.m. and chrysler. this language isn't about fixing the derivatives market at all. you can fix the derivatives market in a most comprehensive and substantive way that keeps americans the best way to create these types of product peds in the most sound and safe way. you can do that. as i've outlined pretty specifically how you would do it, without this section, which i will close by reading one more time how the fair arbiter has defined it, the federal reserve. this is such a damaging section that it cannot be underestimated the damage that would be done to our economy were it to be approved. section 106 would impair the
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financial stability and the strong regulations of derivatives, would have serious consequences for the competitiveness of the united states financial institutions and would be highly disruptive and costly both to the banks and their customers. and, remember, their customers are the people that work on main street for the dhaps use derivatives. and almost every company in this country of any size uses a derivative to hedge their risks. ironically, this is all done in the name of social justice because wall street is bad. so we're just going to go out and cut off our nose despite our face. it is incomprehensible that a nation which has become as strong and as vibrant as we have by promoting a market economy would decide to go down this
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route. which is the an tinge me of a market commitment of but that's where we're. that's what's happening. that's the direction we're going. unnecessary, by the way, as i said earlier. unnecessary. because a derivative can be made safer and sounder by simply restructuring the transparency and the manner in which they are put on clearinghouses, limiting the amount of those that are subject to exemption and pushing people towards exchanges to the fullest extent possible and to the extent it will work. all of that can be done without this diploma type of language, s so destructive, and uke, and, ae federal has said, will have the direct opposite effect of what it is alleged to do.
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mr. dodd: i thank my colleague from new hampshire. and and i are great friends. we've worked on a number of issues together. in a number of months, both of us will be former members of this institution. let me express my gratitude to him for his service over the years and his commitment to these issues. he has focused his ateption on the if i can matter coming -- he has focused his ategs on the particular matter coming out of the agriculture committee. that proposal was supported by democrats as well as my colleagues know a republican on a committee, my colleague from arkansas will point out, as i'm sure we've heard already, thrfsz at least an appearance of bipartisanship on this bill. he raises some very important issues. there are a number of our colleagues which have strong feelings, different than those of my friend and colleague from new hampshire. as he knows, otherwise it would have have come out of the committee with the vote it did. therefore, the subject of a debate in this chamber.
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and i should, of course, have begun by thanking him as a member of the banking committee for his participation and involvement in our product in the banking committee. and the issue before us in the next few minutes as to whether or not we can have this debate on these issues, and again, as my colleague from alabama has pointed out on several occasions, where 80 or 90 percentage are there in terms of agreeing in a major part of what our bill proposals. obviously we're not only there. but you can't ever get all there in one of these debates before you actually have the opportunity to do exactly that, where members have the chance to be heard, to raise their ideas, a different point of view than my friend from new hampshire, who feels as passionately as he does about their point of view. and that is the purpose for
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having a debate and an institution like this for that debate to occur. and so my hope would be again that when this motion to proceed occurs, even though you may have -- you may share the views of my friend from new hampshire or you may have an alternative view -- certainly as is the case in major parts of this bill, as i have writton along with my complete -- whitten it along with my committee members, that is the purpose for which this institution exists to have that debate. no one member no one committee no handful of members should even suggest that they have the right to write the legislation without the consideration of others. so there is a difference of opinion on these matters. i see my colleague from vermont. mr. sanders: would my friend yield forea fe for a few minute? mr. dodd: you better take the next three minutes. mr. sanders: i will do what i can in three minutes. the presiding officer: the senator from vermont.
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mr. sanders: my good friend from new hampshire, my colleague from across the river, apparently does not have a problem with the issue that the largest financial institutions in this country that we bailed out because of their recklessness, greed, and illegal behavior have since the bailout become even larger. three out of the four major financial institutions, all of whom were bailed out, have become larger, and no matter what anybody tells you, when one of these institutions is about to tip over and take a good part of the economy with them, despite the rhetoric today, people are going to be bailing them out. they're going to lose millions of jobs if you don't. now, mr. president, the reality is that we have a situation now where the top six banks in this
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country, despite when the senator from new hampshire has suggested, now have total assets in excess of 63% of g.d.p. we're talking over $7 trillion. now, when you have six institutions with 63% of total assets compared to g.d.p., i think you've got a problem. and you've got a problem for two reasons. number one, they are -- you have a problem in terms of taxpayer liability and the fact that we will once again have to bail these behemoths out. but, second of all, as teddy roosevelt told us 100-plus years ago, it's time to break these guys up because they have incredible concentration of ownership over our entire economy. it is incomprehensible to me
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that the senator from new hampshire can be comfortable as a conservative -- doesn't like big government but apparently doesn't mind huge, huge financial institutions. so i think that anyone who is not worried about the concentration of ownership within our financial institutions is missing an enormously important point not to -- the presiding officer: the senator's time has expired. mr. sanders: not just from too big to fail but economic concentration of ownership. mr. president, with that, i would thank my friend from
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question. the fact of the matter is that we have a new law. changes to the system are
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already beginning. big changes are coming bigger changes will come in january. other changes will be implemented between 2014 and 2018. some of these provisions may never be implemented, at least not in the current legislative form. after all, 2018 is four federal elections and two presidential elections away. health care dominated congress for a year. now we have a bill that has become law and health care will dominate the regulatory agencies for some time to come. we expect thousands of pages of new regulations. groups like the chamber and others will become highly active in trying to shape the outcome
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of those regulations and efforts to minimize the cost they will impose on business and the overall economy. with any 3000 page bill, without the benefit of being invested in a variety of conference committees, it is highly likely we will also see numerous rounds of technical corrections evolves over time. employer groups have varied memberships. they sometimes have competing priorities. the number one priority right now is explaining the new law to businesses so they understand what it will mean to them, their employees, and how best to cope with it. we're not here to give legal advice nor are we here to give financial advice. one of the complaints we had during the health care reform debate was that this legislation would end up being a
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bit of the stimulus bill for actuaries, consultants, and compliance attorneys. nonetheless, we're here to try to provide guidance and general understanding of what the new landscape will mean for businesses and their employees, as it relates to providing health care coverage. before our expert panel begins to delve into the specific provisions of the new law, i thought it would be worth noting what is not in the law to eliminate some confusion that still seems to circulate outside. for one thing, there is no government-1 public option. there's no expansion of medicare to people below 65 years of age. those are two important points. there could be serious consequences still yet to come stemming from putting another 80
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million people into the government run medicaid program. the fact that the government run option in the expanded option did not make it into the final bill helps to contain government expansion into the health care marketplace. there is no payroll tax employer mandate. the bill would of had an 8% payroll tax on businesses that did not offer government- approved health insurance. that did not make it into the final bill. there will still be consequences for businesses that do not offer coverage. we believe they are a lot less damaging than they could of been. there is no special committee of bureaucrats that gets to determine what every health plan must cover. businesses are not required to offer coverage to employees'
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dependents. if they do, that responsibility is expanded, but it is left up to the businesses to decide. help savings accounts are not outlawed by this new law. -- health savings accounts are not outlawed by this new law. overall, you can still keep your savings account and you will not be fined for not having coverage. you can offer it to employees and still not be fined. private insurance has not been outlawed. there are changes that will make it more expensive. there are compliance issues that need to be resolved with all of the new rules. but private health insurance will still be available. many of you are well aware of all that, but we wanted to start today with a clean slate to eliminate any outstanding confusion. there was an important report
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released last week by the centers for medicare and medicaid services the department administers government health care programs. it contains sobering findings. the savings in the new law are more than erased by the new spending in the new law. people who go without insurance and employers who do not provide coverage meeting federal standards will pay $120 billion in penalties from 2014 to 2019. individuals pay $33 billion of that total. employers will pay the remaining $87 billion. the report found that if the medicare cuts in the bill are maintained, an estimated 15% of providers who treat medicare patients will become unprofitable within the next
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decade. that means they may also stop seeing medicare patients. the savings estimates with the $500 billion in medicare cuts cannot be used to keep medicare from going bankrupt while simultaneously being used to fund a new subsidy program. another important finding in that work was the class act, the long term care act imbedded in the bill. it will go bankrupt after the five-year waiting period when it begins to pay claims. if those points sound of all familiar to you, that is because groups like the chamber and many others in the business community have been repeating them over the past year. as i said at the beginning, this bill has passed and is now law. it is time to start thinking about what businesses need to
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know in order to comply with the new law, how to avoid fines, and to explore options to reduce or minimize the cost. before we go to our panel, let's remember that the solutions to make the health care delivery system more efficient that keep people healthy, that those changes have never been invented in congressional committee rooms. they come from partnerships between people who provide health insurance, the people who administer the claims for health insurance, networks, and the people who pay for health insurance, including american businesses. as we go forward, we need to remember the important things we can do and that we're working on in the private sector. that is where real budgets and real bottom lines forces to come up with real, practical, and workable solutions. we will continue to highlight
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the successful well as programs that businesses are implementing to help control costs and keep people healthy. the chamber has already held two major symposiums to help businesses navigate the world of wellness programs. we plan to continue our outreach on our own and with our partners, like the u.s. workplace wellness alliance. we will convened stakeholders to discuss best practices for businesses, insurers, and providers to get the best returns on investment for the benefits they provide. the first step towards collaboration always lies in dialogue. we will bring together small businesses, insurers and foster a conversation about premium increases, the cost curve, new insurance rules, and the realities of our current health care system.
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we will support efforts to broaden the implementation of health information technology and move the health care delivery system forward into the 21st century. we will continue to encourage efforts to curb frivolous liability lawsuits. we may not have gotten tort reform in the law, but that does not mean we cannot continue to showcase successful programs of the state level and hope that others adopt similar strategies of the federal level. we will continue to urge real discussions on how to address costs at the end of life. we will educate more americans and businesses about the benefits of consumer-directed health care, value driven health plans, transparency, the value- based payment systems, and personal ownership of health care funds and their cost. businesses want to provide quality benefits to employees,
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but we will never get costs under control in a system where patients and consumers are disconnected from the costs and quality of care delivery. we will continue to support programs built around the patient-centered medical home, reimbursement reforms that provide incentives to the doctors to keep patients healthy, to coordinate care, maximize efficiency, and to focus on quality outcomes. we're going to keep talking about solutions that should have been included in this bill, real medical liability reform, small business purchasing options, tax. for the self-employed, purchasing of health insurance across state lines, and more freedom to use consumerism like health savings accounts to cover insurance.
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in this debate, a health care reform is not over. fixing the health care system and managing the parts of the broken and managing those who are working well is a challenging job. it is going to take a lot of time, effort, and move from the floor debate to much more than a signing ceremony. we will continue to work for good regulations, to make legislative changes, and if necessary to pursue legal action. we will hold members of congress accountable for helping or hurting america's job creators in the toughest economic climate they have had. businesses do not have the luxury of waiting for our work to be completed today. they know there is a massive new law on the books and they are on the hook for making sure the parts of it implements new flea and correctly.
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that is why the chamber, along with the american benefits council and the national federation of independent business, are pleased to be holding this conference with businesses large and small on what they need to know. i know you are eager to hear from our expert panel. thank you for attending the day. let me call james gelfand appear to introduce our panelists. [applause] >> i am james gelfand on the health care team here at the chamber of commerce. i have a special message for those of you watching. you can participate in the conversation today by email in a question to the panel at any time. we will be able to get those here on stage and passed them on to our panelists. that is if you are watching on
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the web cast. if you are watching on c-span, you can e-mail the questions as well. i will be manning the computer during the q&a the presentations will not be money -- i will be manning the computer during the q&a. the presentations will not be by me. marilyn werber serafini has been that health care reporter for "national journal" since 1995. she is one multiple awards. the most recent was from the association of health care journalists. she also got an award from the journalism center on children and families for an article that scrutinized president bush' controversy a proposal to give states money to encourage marriage and discourage divorce. she is written extensively about medicare policy, the insured, and by terrorism. she is covered congress since 1985. she served two terms as a member
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of the executive committee of the congressional periodical galleries. she received a master's in journalism and public affairs. she is the umpire for the national journalism health care experts blog, a highly regarded website where people talk about the best solutions for health care. she was the natural choice for a referee to daday. thank you. i will hand it over to the panel. [applause] >> and good morning. i am not sure i have ever been called an umpire before. i have never thought of my job that way, but i guess it is in many ways. let me have a show of hands who
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has heard in the past month or so since the law as passed are you relieved it is all over and done? everyone in this room has been following it closely. everyone in this room knows that health reform is far from done. there is a very long journey ahead of us. most of us have become busier as opposed to having free time on our hands since the law has passed. very early on this year and into the beginning of 2011, there will be a handful of early provisions to be implemented. most of them focus on new requirements on insurers. we even have a small business
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tax credit. most of the work will take place over the next decade or so throughout a long implementation. we are expecting there will be some bumps in the road that could lead to some adjustments in the law and perhaps the repeal of some provisions. some folks are already looking in that direction. much is going to depend on the public perception of the law. that is rapidly changing. in january, the public was roughly equally split between supporters and opponents of the overall law. today, it is quite different there have been a number of polls in april. the opposition has been increasing. in some polls, the opposition is now 54%. that is the highest number i have seen. the opposition is increasing. the support tends to be decreasing. there are pockets of specific
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provisions where the support is greater than that. clearly for businesses, this is going to be a very new world. here to help us understand what that world is going to look like our paul dennetanis paul d. he is an expert on help businesses reduce benefits with larger businesses. relations of the blue cross/blue shield association. he works on health care issues for the chairman of the finance committee. before that, he was at the department of health and human
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services. he worked in the office of management and budget. also with us is amanda austin, director of federal public policy for the national federation of independent business. she works with policymakers on capitol hill regarding the impact of health care positions on small businesses. before joining them, she worked for several members of congress. we will go first to amanda will focus mostly on the impact of the law on small businesses. then we will move to paul who will help us understand what larger businesses can expect and when. amanda, start us off. >> this has been a long process for the business community. we were at the table. we were involved. at the end of the day, we felt like this bill was more about coverage than cost.
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an important statistic that came to light at the end of the debate for us was that overall, this bill was going to at best do this a 2% savings on small group premiums. in the individual market, it could be a 13% increase on those premiums. to us, that was a concern. our interest in being involved in this legislation was to reduce the cost for small employers. we feel like this bill as a number of tax increases on the business community that will offset the spending. i will run through two key points that a timely for small employers today. i will talk about what employers can look forward to on the road. their questions about grandfathered status.
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all of our policies are "grandfathered." what does that mean? and small employers make changes to their plans? and they increase their deductible? -- candice small employers make changes to their plans? can they increase their deductibles? we're looking forward to more guidance from them on this. we do know some specifics. we do know that for grandfathered plans, there will be changes. these will affect smaller employers and employees that have coverage today. they will begin eliminating pre- existing conditions in group plans for children under the age of 19. they go on to limit them for everyone in group coverage over the years.
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you see some of the carriers now are already allowing dependence up to age 26 to jump on to their parent's plans if they do not have an offer of employer- sponsored coverage today. there will be a prohibition of annual and lifetime limits. that could increase the costs of plants. there's going to be an elimination of waiting periods. employers typically to have a waiting period because of high turnover rates, especially with employers like restaurants. another important point that is timely is the small business tax credit. that was a big talking point for why this bill should be passed. of the most in this room would agree that small employers and self-employed individuals need all the help they can get in a foreign coverage.
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a tax credit could offset the amount that the employer is paying. the key word is "offset." we do not want to go back year after year and ask congress for another offset and tax credit. we want them to drop costs of long-term and help market stability and competition. we're thankful that the credit is there. we do believe it will offset some costs. but we believe the credit is tight and limited. it is available now for four years outside of the exchange. when the exchanges of been going, it is available for two years. that means the employer has to go into the exchange in two years to get the credit. they will give up the grandfather plant and get the new plan if they want to retain the credit. that is something to keep in mind. the credit is only available for employers with 25 or fewer full-
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time employees. the full credit of 35% is only available in full for employers with 10 and under full-time employees. it begins to phase out between 10 and 25. if you are in the sweet spot, you can get the full credit. there are a lot of employers who may have won high-wage workers and may not be able to get the credit. i think it is limited. we're not sure how many people will be able to access the credit. looking to the future, there are a few key tax provisions and requirements on small employers. starting this year, we will see a 10% tax on tanning. they're adding this to gain more
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revenue. they can look forward to a new 10% tax on usage. in 2011, employers will begin reporting their employees'health insurance costs on their w0-2. there will be new drug taxes on every type of drug use. there are no over the counterpurchases with pre-tax dollars. you will not be able to get a eye solution. -tax in 2011. there will be a new business reporting requirement. all businesses now will be required to report any services or property transactions to the federal government. this will require all
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businesses the purchase these services over $600 to acquire attacks by the number -- to acquire a tax i.d. number and send in paperwork. businesses are spending almost $100 per hour dealing with requirements from the government. in 2013, we are looking at an increase in medicare payroll tax. we're looking and a new tax on investments for earners making overt $200,000 single. there's another medical device tax. there are limitations on fsa at $2,500. 2014 is a big year for employers. there is a lot of discussion about exchanges.
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the individual and small group market will be turned upside down. each state will be required to operate an exchange. if they do not, the federal government will come in and set one up. there are a host of new things going on in these exchanges. let me say who is able to access these. individuals, self-employed can access the exchange. in 2014, the states can do one to 50 with discretion to go up to one to 100. in 2017, it is that state discretion to implored -- allow employers with above 101 employees to come into the exchange. these are designed to provide insurance options for small group individual policies and for people gaining access to subsidies for poverty.
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we will have tight reaching rules requirements. -- we will have tight reaching -- rating rule requirements. right now, the states vary widely. the northeast is much tighter on what they can rate someone's health up or down on. this will have a significant impact on premiums when the scuds into place. in 2014, they will require minimal coverage. we have worked hard to figure out how we can get the coverage affordable and what will be required of small employers. we feel strongly that the coverage requirement on individuals is too high. we remain concerned about how hhs will report on what will be required on individuals and small employers to have.
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we do not know yet. the bill set a minimum threshold. there's more meat to be put on those bones by hhs. there will still be a market for employers. they do not have to purchase within the exchange. the real driver will be to see how these plans and exchange match up to what people currently have when the exchanges open. we do not know yet. people may want to retain their plan or come into the exchange. it is an unknown at this point. the individual mandate goes into place in 2014. the employer mandate was 58 for more employees. paul will talk more about that. it can have an effect on growing businesses and businesses having
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employees seeking coverage in the exchange. i could go on and on. that is kind of where we are. we look forward to working with the regulatory process and watching the national association of insurance commissioners developed models for the exchanges. we think it is one to be a long road. thank you -- we think is going to be a long road. thank you. >> let me start off by thanking the chamber for having us with you today. i want to pick up on one of the remarks that burris made. now that health care is completed from the legislative phase and far from complete in terms of the regulatory phase, it is the number-one issue for employers, simply to understand what the law requires and what their responsibilities are.
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presumably, that is why you are here today or tuning in from the web cast. there's tremendous interest in knowing what these new responsibilities are. i want to start by highlighting some of the good news and not so good news aspects of the law for large employers. i want to touch on a few more aspects of the grandfathering rules. it is a terribly important issue to get straight for employers from a complex point of view and for decision making purposes down the road. i will then talk about the employer responsibility provisions of the legislation and touch on a couple of the other tax issues. in terms of the good news, for large employers the first and central issue that they organized around was the notion that the current federal framework for regulating health
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insurance coverage in large groups is the erisa framework. that allows plans to operate under a uniform theme of regulations and federal law. the good news there is that message was understood and resonated in the legislation. there is some new state flexibility provided in the legislation that is given to hhs and the department of treasury. erisa remains intact. there will still be the option for large employers to operate under that uniform scheme to have relied on since it was enacted in 1974. that was terribly important. there is no public plan option in this overall scheme. that is important for large employers who are very much
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concerned that it could have a disruptive effect on cost shifting and adversely impact on their plans. another important feature is that for large employers, they retain the ability to do their own plan designed in terms of the coverage they provide to their employees. we will talk about that more than a minute. the coverage requirements for the small group market and the individual markets will largely be determined by regulation that will come from hhs and other agencies. the larger group market will be determined by what employers provide, although they will have to meet new minimum standards for affordability. i will talk about what those look like. i totally agreed there is a big
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disappointment on major initiatives in the legislation to address the problem that all employers have on the cost front. there are at least some seeds that could grow into a more robust changes down the road. most of those are things like investing in comparative effectiveness research, making more strides in the medicare program towards measuring quality and performance for health care providers and reporting that information to consumers and purchaseers so they can make more intelligent decisions about where to get care. there are some glimmers of hope. on the not so good side, there are no major changes whatsoever
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on the medical liability front. there is a little bit of seed money for state experimentation. there's going to be tremendous new administrative and regulatory requirements. employers will have to pay much closer attention to that the we have had to in the past. for many of us, there are a lot of unknowns about how this will impact in keeping groups together. for the first time, this is good news and bad news. the good news of having a reformed insurance market through exchanges will mean that people can vote with their feet as to whether they think a better deal will come from employer-sponsored coverage or the new health insurance exchanges. that will present challenges for employers as well in terms of trying to keep their employees
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groups intact so that they can make the coverage is affordable as possible to all their employees. let me turn and talk about some of the plan requirements that apply to the grandfathered plans. the most important thing to know is both what they are and what the timing is for them. for all plans, grandfathered or new, the magic date is march 23, 2010. that is when the present but did sign the first of the two laws related to health insurance reform. in the first year, for any plant
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your the begins within six months -- after six months from the date of enactment, that would be september 23, 2010. any plan that begins after that point has to remove any lifetime dollar lent its rigid limits on the plan. the annual limits will only be permitted under regulations to be issued by the secretary. we do not know yet what the annual limits will be that will be permitted. those will also phase out as of 2014 that is when the insurance exchanges will be up and running. there is a transition rule. there is the ability to maintain annual limits if the secretary allows them, but only until
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2014. then those are prohibited as well. the waiting times that plans can have for after someone is initially hired cannot exceed 90 days. that provision kicks in in 2014 when the insurance exchanges become effective. starting on the same 2010 schedule, pre-existing conditions for children up to age 19 are prohibited. when employers are getting the most questions about from employees would be for adding dependents on to family coverage. i will hold for questions on that. there probably are quite a few.
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one of the issues where there has been a lot of ambiguity has been that until 2014, there is a special rule that says you do not have to offer an individual up to the age of 26 the option to enroll in the family planned if they have coverage for another employer-sponsored plan. we think some of the initial information from hhs makes it clear that exception only applies if the adult child themselves as employment through another source. if i am 24 years old and working and have the availability to enroll in coverage through my own employer, the family coverage for my parents would not be available to me, at least initially. that exception goes away in 2014.
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it is a transition rule. the other two that apply to all plans are the prohibition on rescinding in force coverage and minimum loss ratio requirements. those provisions would primarily affect insured coverage rather than any self-insured plans. there are a lot of other provisions that you are grandfathered for. one is preventive health care services, if you would not be required to meet the new requirements for those until you are a new plan or would potentially fall out of grandfathering status.
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that is a plan in effect prior to the date of enactment. there are new appeals requirements in the legislation. those would apply to new plans. the plans in effect now are already subject to claims review an appeals requirements. a third one of interest to a lot of employers is that the legislation has a provision that applies non-discrimination standards that already apply to self-insured coverage to fully insured coverage. it says you cannot discriminate in your health care offering on the basis of income. this would primarily before plans structured for executive -- this would primarily be for plans structured for executives.
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they would have higher level plans. in the future, those would not be allowed under the non- discrimination provision. that would be a grandfather provision so it would apply to new coverage after the 2011 effective date for those provisions. let me talk about the coverage requirements for employer- sponsored coverage. it does not go into effect until 2014. it is one of the major changes in the legislation. starting in 2014, individuals will have the responsibility to have something called minimum essential coverage. that is the term in the legislation. employers will have the responsibility to provide minimum essential coverage or face penalties.
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for an individual, they have three different places where they can obtain minimum essential coverage. one is through their employer. the other will be through the new insurance exchanges that will be created. if they did not have coverage through their employer, they could obtain coverage on their own in the new exchange. that would satisfy the requirement. the third would be if they're eligible for coverage under a government plan like medicare or medicaid. those would be the three basic sources for coverage. for employers it is important to keep in mind that this requirement applies to any employer that has more than 50 employees. i will talk about how that works. the basic responsibility is that an employer with more than 50 employees has to provide the opportunity for employees to
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enroll in minimum essential coverage. the basic responsibility is that the employer has to give someone at least the opportunity to enroll in coverage offered to that employer plan. it implies -- applies to full- time employees. the basic responsibility is to make the offer of coverage available to full-time employees. when you determine whether you have more than 50 employees, you count that on a full-time equivalent basis. that becomes really important for smaller employers. you do not discount the individuals or working 30 or 35 hours a week. you also add up all of the part- time employees and calculate those on a full-time equivalent basis to determine if you have 54 more employees. if you fail the test because you do not provide coverage to your
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employees, there is a little bit of relief in the legislation were you are not penalized for the first 30 employees. but then you pay a penalty of $2,000 on each of your full-time employees above that 30 exemption on all the rest if you fail to provide coverage. another important responsibility that the legislation establishes for employers is to provide affordable coverage. this situation applies to employers that are providing health insurance coverage, but the losses to have to make it affordable as of 2014. affordable basically means that the coverage you provide has to cost more rigid no more than
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9.5% income for that employee, household income. the coverage has to have a value of at least 60%. that is the actuarial value. it is a measure of how much the plan pays in aggregate vs how much the employee pays out of pocket for things like deductibles. whenever the plan is providing, it has to pay an average debt -- aggregate of 60% of the cost of the claims for those covered benefits. if the plan fails to provide affordable coverage because it is not affordable to the employee because it cost more than 9.5% or does not deliver at least 60% value, then the employer is required to pay $3,000 for each employee to
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obtain health insurance coverage in the health insurance exchange and receives a subsidy in the exchange for the coverage they obtained their. that same trigger also applies in the case of not providing coverage at all. what triggers the penalty for employers in that case is if even one employee goes into the health insurance exchange and obtains a premium tax subsidy. there is also a unique affordability test in the legislation that would require employers to provide a voucher to employees if they do not provide affordable coverage through the work force. that comes in at a lower amount starting at 8%. if the coverage costs the employee more than 8% of their
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income, then the employee is required to provide a voucher that would go to that employee. they could take that voucher and purchase coverage on their own in the health insurance exchange. that voucher has to be equal to the largest amount that the employer would provide for coverage for employees to which the offer coverage. if you are providing a range of options, this the largest contribution you make to any of those options. that was added to the legislation by senator widen. larger employers will be required for the first time to automatically enrolled employees into health insurance coverage at the time of highere. that will be subject to
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regulations to be issued by the secretary. we do not know details on that or when the timing would kick in for the requirement. we expect it would be another 2014 effective date, but that will be determined by the secretary for regulation. there is a new notice requirement that employers will have to let employees and new hires know about the existence of health insurance exchanges and what the consequences of that would be if they do not elect employer coverage but instead decide to get coverage through the exchanges. i also wanted to mention a couple of the other tax provisions and then we will open it up for questions. in addition to the tax provisions that amanda mentioned, there is one that would be important to a lot of employers.
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starting in 2013, there is a limit on the amount that can be contributed to flexible spending accounts. it is limited to $2,500 starting in 2013. then for each year after that, it is indexed by the consumer price index. nothing in the legislation prohibits helalth savings accounts. that is good news. but there is an important tax change. starting in 2011, the penalty for using phones from held savings account for something other than qualified medical expenses doubles to discourage the use of health savings accounts for non-medical uses.
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it goes up to 20% starting in 2011. one that was of particular concern to the large employer community is that starting in 2013 large employers face a major tax change in the treatment of federal subsidies that encourage them to continue to provide prescription drug coverage to medicare eligible retirees. that was established when medicare created the prescription drug benefit. it was the subsidy provided to employers on a tax-free basis. this change means that employers would now have to lower their tax deduction that they are otherwise entitled to by the amount that they received in the subsidy payments. as you probably saw immediately after the legislation, that
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impact of large employers significantly. for those employers that receive the subsidy on behalf of their eligible retirees, they had to post a major change in their earnings immediately upon enactment. in some cases, those hundreds of millions of dollars as a result of that single tax change. for some, it was over $1 billion for that provision alone. that was a significant provision in the large employer community. we can stop and see if folks have any questions. >> thank you for the overview. i will take the opportunity to ask the first question. then we will spend the rest of the time and your questions. amanda, when you are talking about coverage requirements, you said there is more meat to be
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put on the bones by hhs. that statement applies to many provisions that affect businesses. how much leeway does hhs have in writing these regulations? what kind of an impact could there be on businesses, depending on how these regulations are written? are there any areas of particular concern moving forward? >> this was an enormous issue of debate and discussion about the health care bill discussion. for small employers today, what is allowable for them to
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purchase means of the insurer takes on the risk. that is dictated by the state. we know what state benefit mandates are. some states have a higher threshold of benefit requirements than others. it is extremely hard to find a perfect point of what would be affordable for small employers. there are regional differences. the northeast tends to be more expensive with the larger scope of coverage for small employers than the midwest and the south. our major concern was how you will find affordable for small employers. what is that? today, it is already unaffordable. our concern lies with what else they are going to dictate be
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included in the new minimum the essential benefits package. this is the baseline for where all health benefit plans will pivot off of. small employers shop. they tend to change policies often, if not your to your, every couple of years. . .
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>> i think the only state that has done that so far is massachusetts. what kind of impact will that have? we're going to look to what are the buckets that will be required of carriers to cover, and what will that do and how will impact the cost? >> there are lots of questions players are asking now about the legislation -- some of them are very technical and some of them are very broad. let me mention a few people are very eager to get answers to. amanda mentioned one of the issues would be for plans and
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are grandfathered in effect on march 23rd when the president signed the bill. how do they maintain that grandfather status? in the house bill, there were some provisions that said you could not make changes that change the premium amount played by -- paid by employee or the cost sharing my board and certain percentages. if it did, that ended grandfather status. that was not improved in the senate bill or the bill the president signed. what was signed was largely based off the senate package. it's not clear whether the intent was to provide that flexibility in the future -- they need to make adjustments to keep the packages affordable and there are simply best practices
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people are trying to incorporate all the time into the way they design health-insurance plans. or if they do that, could any of those things inadvertently trigger them to lose their grandfather status and face all these new plan requirements. another big unanswered question we get asked all lot is how does this legislation affect retiree plans? was it even if -- with even intended to affect plans offered to retirees? much of the legislation refers to employees, but there are big unanswered questions about whether the plans require -- the plans apply to retirement only plans. annual limits are going to be subject until 2014 to restrictions issued under guidance by the secretary.
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we do not know what those are yet. yet a lot of plans to that annual limits, either on the plan as a whole in terms of the total about available or by category of benefits. people really want to know the answer to that probably the last one people ask all the time is they are very much aware it can take the agency's many months to interpret legislation this sort. they have to go through their own internal review before it is finalized, yet employers and insurers have to make decisions right now about the types of plans they will be offering starting next year. they are already well into the planning schedule. one of the things they want to know is if i make a decision based on the best information i have and try to take a reasonable, good, safe
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interpretation of the legislation, am i protected from agency enforcement actions or liability? otherwise, if i do the best i can in the guidance because that is in the real world will not happen for many employers. >> let's turn to your questions. there are two microphones, so if you have a question, give us a sign and one of the microphones will come to you. we already have some questions coming in by e-mail. any questions in the room? >> i work with anchor national organization. i have a basic question that four different webinars have
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been unable to answer. what is the requirement for coverage of dependence? requirement, -- most of the focus has been on allowing adults to the age of 26. second question -- when you get reconciliation talked about, that's an issue of full-time. then there was full time equivalent, and you added up of the part-time and/120. would you explain to me what that means it you have to hundred employees and 75 of them are part-time. >> let me take a stab at the first one. this is going to be this this webinar that does not give you
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an answer. the reason is there is not an answer. what it says in the employee responsibility provisions is if an employer fails to provide full-time employees and their dependents the opportunity to enroll in minimal essential coverage, they're subject to penalties i described. in the house bill and the bill approved by the senate health committee, there was a much more clear statement about the required to cover employees and their dependents. our understanding is in the discussion of the senate bill when those were ultimately emerged between the two committees, -- ultimately emerged between the two committees, there was what i would call constructive ambiguity. it is clear yet to provide the opportunity to full time and place to obtain minimal
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essential coverage or be subject to penalty. it is not clear what the parentheses means. if you have to make it available to dependence or whether it remains as it is today, an option. we would hope and expect legislation leaves it an option because that goes on to make clear the only penalties apply to an employer if he did not provide affordable coverage would be based on the assessment of your full-time employees. whether the front end requirements is meant to require employers to require coverage to dependence maine -- remains ambiguous. on a full-time equivalents issue, in the example you gave, the employer would be subject to the employer responsibility provisions because this begin
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with 50 full-time and police -- full-time employees, 75 which -- 75 of which are part time, would be subject to the provision. basically, you count up all of the hours worked by part-time employees and divide by 120 hours, which is 30 hours a week minimum times for weeks and determine how many of those part-time and police are full- time equivalent employees and add them -- part-time employees are full time equivalent and add them -- but once you are over that, that's the only reason you count part-time employees at all. >> the coverage offered to the so-called part-time -- is that
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prorated or must be the entire package? >> is not covered for part-time. it is for the purposes of whether the employer fails the test. you're not technically providing coverage to part-time workers. they just assess what triggers the employee size and weight can be exposed to. >> what is the requirement for the employer -- anderson would you are saying what triggers that -- i understand what you are saying triggers that -- which have given the best answer yet on the dependent one. what would an employer's obligation be for those 75 people who provide part-time -- >> you only consider the part time for the purpose of determining if you have more than 50 employees and have requirements with respect to full-time employees if you do not offer coverage or affordable
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coverage. there is no employer responsibility to cover part- time employees, and that is defined as an individual working less than 30 hours a week on a monthly basis. somebody working less than 120 hours a month. that remains an employer option. if that individual does not have affordable coverage, they would have the ability to get coverage through the exchanges in the future. >> other questions? >> and with the associated press. my question has to do with the extension of dependent coverage for kids up to age 26. last week we saw some of the
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insurance companies said it would make this effective immediately for people to buy insurance directly from them. what do you think large employers are going to do? are they going to follow suit and make it effective, available immediately, or, practically speaking, when do you think we will start to see that for employees at big firms that are self insured? >> it's a good question. it's probably the number-one question employers are getting from their employees -- how soon can i offer coverage for my children up to age 26 and get them on my family plan? there are a number of questions that need to be asked by the agencies and to the extent employers get guidance on this questions will determine the lot as to how quickly they can act.
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for example, one of the things that them that -- that affects employers and and police are what are the tax consequences of moving rapidly to add a dependent age 26 on to family coverage. there there are provisions, it is not clear, though, exactly when they were intended to be effective that says if you do that you don't have to add to the employee the value of that dependent coverage as income to the employer -- employee, sorry, so that they would have to pay taxes on that and that also affects employers because if that amount is considered to be taxable income to the employee then the employer also has to gary payton roll taxes on that amount. people need to know both as an employee and employer what are the tax consequences of making
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that change before the beginning of next year, 2011. there is a similar kind of issue that arises that -- that is for the timing of all of this and that has to do with this clarification of whether -- until 2014, that an individual has coverage through another source of employment is not offered coverage through parent's plan but is required to obtain it through the other employer plan, whether that is onlies a we think is the case only applies if the adult child itself, him or herself has
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coverage through their own ther just employment. and often work two 30 an hour a jobs. which employer would be responsible and where would they get coverage from? >> you know, that any employee that is working more than 30 hours a week, they would have --
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the employer if that case would have a responsibility to provide that individual the opportunity to enroll in coverage or again would face penalties if they did not starting in 2014. so if they were working two jobs, working more than 30 hours a week, they would presumably then have that opportunity through both jobs and would simply choose which one was the better offer for them. if they were working under 30 hours a week, they might have that opportunity as a part time employee. many employers do provide the opportunity to part time workers to enrole in a plan but they wouldn't be required to. l responsibilit coverage after 2014. they would get that to the health insurance exchanges. >> if the new law opens up a lot
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of privacy-related issues between the relationship of the employer and employee. how does the spouse obtain coverage? who is going into the exchanges to is not? there are still lot of unanswered questions as to applications on penalties and to is getting coverage where. we still assume these questions will be asked because the individual mandate will precipitate a lot of that and probably precipitate more conversation between employers and employees on their requirements. >> we have a question -- she would like to know if you believe there would be a clarification of grandfathering before september 23rd? >> i will take the bet. yes, i believe so. >> i don't think we will have to
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wait a lot longer. the first batch of agency guidance is to out this friday, april 30th. that's an important day to walk of -- to mark on your calendar. our understanding is there will be some guidance that will be out on annual and lifetime limits and on the age 26 requirement and the pre-existing condition of to age 19. something we did not touch on today is a new reinsurance program for early retirees, individuals between the ages 55 and 65. that becomes effective within 90 days after the date of enactment. all those provisions will see some initial guidance possibly this friday. when they do that, it would seem to me it's pretty likely we would start to see some initial agency thinking around the
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grandfathering rules. >> let's take one more question from e-mail. this person wants to know whether the exchanges are intended to lower the cost for small businesses and will work -- will it work? >> @ think the intent behind the exchange's is to set up a more functional marketplace. these exchanges have been obtained at the state level and state regulatory oversight is that the state level so the federal rules come out and the states implement them. a couple of the comments over what the concerns are are frankly what they wanted to do is to achieve more efficiency with administrative costs -- small group policies and individual policies and have
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more costs than a large employer. drafters would hope these exchanges can shave some costs there. the agent and broker role is an important one for most small businesses. i think it is unclear to the extent of how the exchanges will utilize agent-broker and will look to shave off the cost -- like selling your house for sale by owner as to paying a commission -- a broker. i think they will be a source of the information and there's a lot of uncertainty about what the new law is going to look like. probably the biggest issue for us is what the benefit will be on the actual exchange.
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that will be the driver of cost and the driver of utilization. if more people use this system, the cost is going to go up. that's not funny mass, is the way it goes. that is why the question is what is middle essential coverage going to look like in this package compared to what people have today? we're working with a smaller risk pool. some states are bigger than others. we're hopeful more people come into these exchanges and access coverage, both young and old. but right now, we have to separate pools where looking at -- grandfather policies retain pooling of the rhone and the exchanges will pool outside of it. -- retain pulling on their own and the exchanges will pull out side of it. we do not know what that risk is going to look like yet. i think it is uncertain right now how much is going to be shaved off at the end of the day
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for purchasers in the exchange, but we are hopeful. >> i would add one other item -- starting in 2017, states will make decisions about whether to make exchanges available to larger and players -- large either being about 50 or 100 and and how the state defines small employer. the same question about small employers, large employers may be confronting it as well after 2017. does make sense for me to get health coverage as large employers do today outside of health insurance exchange or does the availability of coverage through an exchange in some states down the road, does that provide for some new opportunities for large employers who were not there before? a lot of that will turn on the
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issue of what is the most affordable choice but as for the employer, but for the employee. >> i'm with the tire industry association. back to the 200 figure for a moment. with regards to automatic enrollment, to questions -- are the fte's part of that and what are the ramifications of automatic enrollment. >> they're not included for automatic enrollment, that's only when you include part-time employees on an fte basis. it's apple -- applicable only for that 50-employee threshold. that is the responsibility of
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providing coverage and affordable coverage, but that's an interesting question. in terms of administrative, we don't know yet because the way the way -- the way the provision is written is pursuant to regulations issued by the secretary. the basic requirement is simply that you provide the opportunity for individuals to be auto- enrolled in a policy once those policies are issued and toss with the effective dates would be. -- and they tell us what does effective dates will be. they will tell us if the employee can opt out of and they were bought a-enrolled in. this will be holding a practice. it only applies to employees --
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employers with more than 200 employees. we will have to see exactly what the requirements are. it is consistent with the notion that everybody has in 2014 and beyond a responsibility to obtain coverage. the idea here for coverage is to get everybody in as quickly as possible in a plan of the have went through their employer, but not to requirement. the individual can still opt out of that placement into a plan if they choose to. >> good morning. what would the federal law mean with regard state-imposed health benefit mandates for the small group plans in the states and with the health insurance exchange of policy that can be picked up?
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>> i believe the states can go over and be on the level of coverage required by the federal government. maryland is pretty high already. i don't know if there is more a question of whether minimal essential coverage is going to be lower than what a state has and what does that do as far as requirements? as far as i know, it can be sold or at the federal level. >> i don't think that would be the case. i think once the federal rules for minimum coverage are issued, that state flexibility for insured coverage would begin above this federal minimum requirement. the coverage would only apply to the insured plans and provide obligations on a minimum basis
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-- as far as the exchanges, understanding is the way the legislation is crafted is there are many states that have exchanges today but the secretary could review -- but the state could deem these requirements for leas own exchanges of as one hour has put one in place before 2014. >> but the bottom line is the coverage in maryland will be what is applicable. it will be over in your opinion? they can go over what the federal floor sets cluster >> any state can go over the federal floor, but i do not think they can go under it.
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>> we have a couple of e-mail questions on the same subject. people want to know how much they're going to be on the hook for in terms of premiums? how much employees premiums does a business with more how much of employees' premiums does a business with more than 50 employees have to pay. is there a maximum plan deductible for employees and we also have dom decker who wants to know if he is already paying 80% of employees' premiums is he going to have to pay any more than that? >> ok. let me take a stab at this. the basic retirement is to make coverage affordable. if an employer provides coverage, the am of the premium that is paid by the employee may not exceed more than 9.5% of
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that employee's household income or if it does exceed that amount, then the employee gets coverage and health insurance exchange and receives a tax credit, a subsidy in exchange for that coverage and the employer would be subject to a penalty of $3,000 for that employee. in most cases, they only know what they paid the employee, so they do not know what their total household income is. they will have a notice responsibility to tell employers about the availability of coverage in the exchange and the availability of premium tax credits in the exchange and i am assuming this notice requirement will require you to give you some examples if the income from
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your total household is above this amount -- you along qualified for premium tax credits. if it is below a certain amount, this is how much of a premium tax credit you would qualify for. employees would be able to go to the exchange and say this is my household income and this is how much i have to pay for employer- sponsored coverage. it's going to be affordable because it will cost more than 9.5% that of my income. the exchange would certify that pan informed the employer that they are responsible for paying a penalty. the basic obligation is to keep affordable as far as the 9.5% threshold. as far as the deductible question, i do not think we know yet because one of the really important issues that will be determined by the secretary when they define the essential
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benefit package will be what the level of deductible would be. >> i thought it was a cap on the deductible level for single policy of $3,000 or $4,000 for a family. that is my understanding. >> i would like to follow up on a point about maryland. the anticipate states will get their exchanges up and running before 2014? >> and its possible. the only states right now with the exchanges are massachusetts
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and utah. they will have to be certified at some level for the subsidies to flow through -- which is another question on how many can have subsidies flowing to the state. i ask the commissioners and they assume it will start before 2014, possibly 2013, but they do not see any activity before that. >> is kind of a more academic question for larger employer groups because they will mollify to participate in the health insurance exchange if you have more than 50 employees or if the state defines that at 2100. at the discretion to allow groups to participate in the exchange. any employer that has more than that will not be permitted to
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offer insurance through the exchange trader question is well taken. there are 48 states to go and there is a pretty good blueprint for what a qualifying the exchange would have to look like. that requires action in state legislative bodies throughout the country now, so there will be a big push for a state law to come in with these requirements. >> it seems like u.s. pressure building in a few areas where companies are being told they'll have to lower the cost of these plans for employees, yet this scope of the plant is expected at some level to be higher quality plan. how do you see cost pressures building in small companies and how you think they deal with it?
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>> i was looking last night at the report bruce talked about earlier. it looks like they are going to lose a million out of employer- sponsored insurance at the end. it looks like people will switch over to medicaid and the exchange. there are different triggers attached now and people were can -- and where people can get coverage. i think the cost pressures are always there, particularly for small employers. particularly for the rate spikes a of seen and it could potentially make them drop. most typically, for us, we see them move that deductible around to retain the coverage. i think you are going to see a lot of concern and probably more
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retaining the grandfather plan as opposed to changing. that's probably going to be a discussion between the employer and their agent a utilizing today on what their options are. it is not typical, like a large employer with a january 1st. i think the uncertainty is there and cost pressures are probably going to go up. it is possible we're going to continue to see a drop in small employers. that said, the individual mandate is going to pressure on employers to offer coverage and to the extent that makes the rates go up and is sustainable for the employer from a bottom line perspective -- because these are pocketbook issues for employers -- they either have the money or they doubt. they will shed a worker of the
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need to retain coverage or not hire. there is no money pot. we just don't know yet the full scope of what we're going to see in the next three to six years. >> there is a question about the dependent kids up to age 26. can 26-year-old dependents be offered cobra? >> the question is whether employers could be [inaudible] on the effective date. it begins six months after the date of enactment. one of the unanswered questions is if you do offer coverage, how the price the coverage for the employee?
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if i am the parent and i want to add my 24-year-old, do they come on to the plan at the same premium otherwise for family coverage or does it work the way it does in many states where they have had similar requirements, where the employer or insurer can create a separate rate for the coverage offered to that individual. you could have a rate that would be equivalent of a cobra rate -- what would it cost for coverage provided to a 24-26 year-old or a 21-26 year-old individual? that is an unanswered question. there is not any thing in the legislation that prohibits their being a separate rate created
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just for adding the adult child onto family coverage. also does not say the rate must be the same as the family rate. i think that is one of those unanswered questions we will be looking for further guidance on. >> which employer pays the penalty for two working spouses? >> if both spouses are working more than 30 hours a week, they're both required to have the opportunity to enroll in minimum essential coverage. both employers would have that responsibility and both looked at -- both would pay a penalty if they did not provide coverage to those workers. it's not done on a spousal basis, it is whether the
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individuals working more than 30 hours a week. >> how often must employers calculate full-time equivalents considering those employers to ramp up with seasonal workers? >> that's a good question. the actual obligation over the $2,000 penalty and $3,000 penalty, while we talk about them that way, they are assessed to an employer on a monthly basis. one of the questions -- this is one for guidance -- how often does the employer determine if they have more than 50 employees because they're subject to penalties not on a calendar basis, but each month. for people that have a
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employees that fluctuate around at and fit the magic employee mark, this could be their confusing if sometimes they're depending on how they account seasonal workers or the influx of workers to take on a search of work that occurs in their schedule which occurs only at certain times of the year. they have more than 50 employees and other times they would not. it is possible that this calculation could be made numerous times during the year. >> we interpreted it as a monthly, the same way paul did. certainly more guidance is needed and seasonal workers are exempt, aren't they? we have gone back and forth on that. >> only certain categories of seasonal workers. the legislation says the only
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individuals that are seasonal workers who worked during the holiday season are not included in the calculation of whether you have more than 50 employees. some employers don't bring on seasonal workers just for holidays, but because the need for seasonal workers related to other factors other than just the holiday season. i believe the legislation says for those people you bring on just for a short time, if they are working more than 30 hours a week on a monthly basis, that they be required to offer health insurance coverage just like anyone else. >> somebody from jetblue has a question and wants to address the underlying question of health-care costs. does the bill provided the specific tools are programs that can be used to reconnect
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employees to the true cost of health care? >> i think there were a lot of those, we would all be much happier. there would be of more people satisfied with the legislation. it's also the criticism of the massachusetts law. the coverage requirements came first, the cost requirements will be the things we will continue to struggle with overtime. there are few things that help. one of those we considered it important is it allows employers to provide stronger incentives for participating in employer- sponsored well as programs. all right now, under regulations, you can only very premiums are cost sharing by as much as 20%. in wellness programs, it gives a little more flexibility,
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allowing for a variation of up to 30%. i mentioned briefly there is comparative effectiveness research that will be underway very shortly. a new infusion of funding for that purpose in the legislation and there is a new quality measures for performance of health-care providers and services already used in medicare now, but will be increased under the legislation. that is important because while it only apply it to medicare, they are the 800 pound gorilla, the biggest player in the system. some of those practices are likely to be picked up the the private-sector as well and could give us better tools at individuals when we have the ability to choose between health-care providers and services to make more intelligent and better informed
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choices in can today. there is some of that but it is certainly not as robust as some of us would have liked. >> if you are going to tip your hat and individual responsibility and engage the individual, the have to get to a system of true individually- purchased policies. for far too long, employees have taken more of a backseat approach to employer-sponsored insurance. what we are seeing now is obviously more money coming out of the pocket of the employee and more concerned about where it is going and how it is being spent. i think the bill tries to address some of the transparency of the system and how people view it and can shop in it more efficiently and at the exchange will set up more of a relationship, potentially between the consumer and the
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insurance policy. along with the wellness and prevention aspect of it, the individual getting more from the system than they would expect in the past. i think is an attempt and employees have been in the backseat a little too long. i think the inertia of the individual mandate will drive more interest from a consumer interest as far as what i am getting from my dollar. because there is a penalty attached if you don't have it. that will drive behavior long term in the system. >> what take one more quick question in the back and then we will wrap up with an e-mail question. >> thank you. i represent clarion health systems. how do you think drafters were planning on hsa's? where they encouraging a more was some of the language in the
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bill be more discouraging? i think it plays out of with a recent conversation with personal response ability. >> i will let paul elaborate more on that. it collapsed on the ability to utilize more consumer-based products. with the limitations on deductibles, the total out of pocket cost, all of the first dollar coverage now being required -- not that carriers are not going that way anyway, but i just don't think it incentivize is it much. at the end of the day, it's a cost comparison for our employers -- what is less expensive? tonight maintain the coverage and what are my options? if they require these plans to cover x, y, and see, i'm not sure there will be there long term. i'm not sure you can put anything in these pretexts
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accounts anything, s -- into anything, so the direction is opposite for me. >> for me, it's more of a mixed picture. there wasn't any language in the legislation that specifically says cannot offer hsa's, or high deductible health coverage. there was a provision that says a few do use and hsa for non- qualified medical expenses, you'll pay a higher penalty for using the funds for something they weren't entitled to it. there is also a change for using them for the reimbursement of over-the-counter drugs, and that is also restricted. those are pretty modest changes, but the bigger picture issue is as they translate this benefit package into the specifics, are
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there any regulatory requirements in the translation that will be in conflict with the standards that apply for hsa's, for high deductible health plans. there's nothing that requires that results and we would certainly hope in the translation of the legislation that nothing interferes in the future with being able to offer that type of benefit package. the other important provisions have to keep in mind is what every offer has to deliver at least a 60% value in terms of the coverage. while i am no actuary, the actuaries say most high deductible health plans to date would well exceed that amount, so presumably if they keep that in mind as they develop the benefit package, as% payout in
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aggregate that they would be built to comply with that provision as well. >> no panel discussion would be complete without [inaudible] how will the arisa plans be affected by the rules given by the office of management and budget redefining welfare plans? >> the department of labor has sent a rule over to the office of management and budget which has not yet been published. so we don't know what tenet. -- we don't know what's in it. in the case where the coverages
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provided by a government entity, a state or local government, to a non-government employee -- if you think about that, that would describe this that they have in the city of san francisco, where they have created a government sponsored plan but it is available to non-government employees within san francisco and would find that as not being an employee welfare plan. that has important implications because of that the case, many other cities or states could do the same thing and it would not be prohibited. you could end up with cities and states the saying they could do it and would undercut the purpose that congress created
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the uniform from work available. we think employers' average -- we think employees -- employers have urged me what office of management and budget and that should be withdrawn because the president has just signed a major new piece of health-care legislation, the first order of importance is to interpret that law and make sure it is implemented properly before we add anything that would have any ambiguity with the laws currently in effect that employers have been relying on for over 30 years when they offer coverage to their employees. we think the time for that proposal has come and gone. instead of issuing that rule,
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they will do the things to provide guidance and all of the questions being asked today about the legislation the president assigned. >> thank you very much to amanda and paul the venture lots of questions and left us with the attending are many questions we cannot understand now and will be asking for a least a decade. thank you very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> we're going to answer those questions in the next 10 minutes. >> my name is randy johnson and i had the privilege of working on capitol hill when the clinton health care bill went up and,
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testified in the senate before the health committee and house ways and means committee on the present legislation. in spite of that, i always remain confused as to what the impact of this legislation will be. i think we will short -- will sort through this as this paneling clear, for some time to come. the consultants and lawyers would return this deal. in that case, it's good for one part of the industry in this country. a lot has come out already, 10 pages summaries of what will happen and the time deadlines we have to me. in a year from now, we will seek treaties come out in the 500 page range. so hopefully we did this with that 40-page primer you have an affront to be. we will be issuing a more formal version in a couple of weeks. to put that together, i made a decision to hire someone i knew
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for several years that as banking on health care area for some time. he spent many years on capitol hill working in the health care area and is the executive director of the health i.t. coalition. i think you will find that filling in the gap between not enough information and too much information. with that, i will turn it over to him and we look forward to your comments. >> thank you. they gave me be enviable task of going through a 2700 page bill in 10 minutes. so i would like to thank the chamber. i would also like to thank my staff for helping to put this primer together. it should be in front of you. it's a little less than 40 pages and it's an attempt to break down the issues that are of critical importance to employers
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and easily understood language. hopefully with some references and source material that you can go back and take a look at. because we focused on very specific questions about of the law, i thought we would take a step back and talk about some broader themes -- take a step down into the weeds and talk about specific examples, and then take a step back to talk about some of the issues coming up this year. hopefully you will not get nauseous in our step back, step forward, and step back. i have had that happen in some presentations recently. it's okay to laugh. it is important to note that the law does largely address some coverage issues and it is not very robust in the cost- reduction area. that was one of the last questions we had come up. i think that is for several reasons. one of the most important is with these mandated benefit
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packages on some insurance policies, consumers become less sensitive to cost and the effects of the benefit mandates in this bill act as novocain on price sensitivity to consumers. there was a memo that came out at the end of last week that said more than anything, that utilization of health services is going to drive up costs fairly significantly. it talks about on the order of somewhere around two under $20 billion. the revised memo is somewhere in the area of $300 billion trade that the major factor in the cost equation. constraints apply -- doctors and hospitals available to treat the newly-covered and formally -- formerly uninsured, means that supply and demand are not equaling out and providers will have a better negotiating lever to negotiate higher reimbursement rates from health plans. one issue that is absolutely
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critical, because there is a large expansion of medicaid as part of this law, reductions in public plan reimbursement will do a cost shift onto private plans, including employers. there was an estimate released last week that showed about $65 billion would be cost shifted onto private plans which means employers and insurers would be faced with raising rates and consumers would be faced with more expensive health coverage. the combination of those three things is going to mean that employers are going to be looking at more robust packages, but more expensive packages. so the desire to get costs under control here is critically important. the second point i would make is we are moving away from a more flexible, nimble environment for
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employers to provide employee benefits to a much more structured and punitive environment. you have heard a lot of those issues here -- employers are going to be on the hook for about $52 billion in penalties for not offering affordable health care coverage. that is a very real cost to employers in this country. in addition, 7.3 million individuals will end up paying a penalty for not getting individual coverage as required by law. that's a very real burden by families and individuals. one of the issues that was talked about a little bit -- the excise tax -- excise tax on high-cost insurance plans -- these are known as the cadillac policies, very robust packages of benefits. about 26.7 million people will be subject to that high-cost 40% excise tax -- excise tax
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beginning in 2018. with the joint economic committee has estimated is your average family plan premium would be subject to the high cost excise tax -- high-cost excise tax by 2017, subject to the supposedly high cost excise tax. the last one i would make on a broad level as this bill relies on interesting financing mechanisms. it is not all about health care. i know this shocks a lot of view, but half of the revenues, the $430 billion in revenues, is made up by $210 billion in taxes in the form of new medicare increased payroll tax and a new 3.8% investment tax. that's a tax on labor and tax on capital. in general economics, when you tax things, you get less of the more they become more expensive.
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we can see labor costs will increase in these provisions. capital becomes more scarce for smaller businesses which means engines of job creation and growth will be slowed down by this. that is a tax that starts in 2013. . there is a question over here on this side of the room. if you take a look at page 6 or 7 and try walk through steps the employer would walk through to determine whether or not they would be subject to those new penalties and then we take you through a series of examples on how those penalties with actually calculated. how do you calculate whether on employer is subject to the mandate to provide coverage or pay a fine and it walks there how you calculate those
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part-time employees. here is an example from jim's auto repair because he hires five part time employees trips the threshold, the 50 employee threshold subject to the mandate and if he doesn't offer coverage he will pay a penalty. he is going to think long and hard about hiring those part-time workers and stay at just under 50 employees and those economic decisions are going to be made across the economy. if you're thinking about not hiring as many part-time workers it could have a fundamental economic impact on job growth or creation in this economy. include.
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this is an le of a company located just outside of philadelphia, 55 workers, and currently the company pays $600,000 in health care benefits to every year for their employees and families. under the new law, if they dropped their coverage, they would be assessed a penalty if someone went into an exchange and got a tax credit. that penalty would be equal to $50,000 a year. so the economic decision before the employer is, do i continue to do the right thing and provide benefits for my employees, or do i drop, knowing that they can get into an exchange, and pay only $50,000 a year?
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as you go through the primer, one particular section which picks up many pages is the section on taxes and revenues. lots of interesting items in here. one thing you have already heard about, small employer tax credit. this is something that is critical to a lot of people, because small employers are the ones hardest hit by these increases in medical care. it is important to note -- amanda thought about this little bit -- the folks available for this credit for are severely constrained. you have to be below that employee threshold, below the $50,000 average wage cap, and you have to wait the entire
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year to claim the credit. these are significant hurdles for small businesses. it will be interesting to see how many of them actually take this up. the small business tax credit is also not sold to private. that is about 70% of small businesses in america. it will be interesting to see how robust that small business tax credit is. obviously, this is a category of folks that are prevalent on a daily, real basis. -- struggling on a daily, real basis. we tried to highlight areas of concern. we did not get to everything, we could not, in the 30-page document. for the immediate regulatory issues that need to be held this
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year, you have heard it before. this grandfather plan is huge. right now and employers are frozen in their benefit designs, cost sharing responsibilities, deductibles, so they're absolutely needs to be clarity. in addition, medical loss ratio will need to be defined. ali, they are very broadly defined. my personal hope, view here, fraud and abuse programs, programs to prevent that, care programs, should be defined as medical care benefits. if they are considered outside of your benefit dollars, it would hurt you. if you do not reach 80% in the
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small market, you have to start paying rebates to consumers in 2011. one thing that we have not talked about, within 90 days, initial internet portal, compare planned. we hope that is robust, that it provides a lot of information, so that consumers can really comparison shop, not just on prices, but on disease management, wellness care. one last thing on small business credit. it will be critical -- the owner will be included or excluded from the calculation of the average wage. it included, it means a lot of small businesses will not qualify for the credit.
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again, this primer does not catch everything. as you have heard, there are lots of questions, and hopefully, we will start to be able to get some better answers. thank you. [applause] >> we want to be mindful of all your time today. thank you for joining us. special thanks for everyone who provided insight today, as well as all of you participating online and this important process. we will continue to be active in this process, moving forward, over the next decade in full implementation of this bill, and will be working to improve it and making changes to make it better for everyone involved, especially from the employer
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/employee perspective. there are a number of ways that we will do that, all of which include advocacy and your involvement in the process. so thank you for joining us today. we look forward to continuing to work with you in the coming months and years. [applause]
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>> this morning a look at the role that goldman sachs and other investment banks had in the recent financial down tun. several former executives testified before a senate investigation subcommittee live at 10:00 a.m. eastern on our companion network c-span 3. sunday on book tv's in depth television analyst, author and columnist and three-time presidential candidate pat buchanan on conservative ideology and the political climate. he will take your calls and emails and tweets. >> next, political analyst
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charlie cook talks about this year's elections. he spoke at a conference of community bankers. this is about 50 minutes. [applause] >> charlie, i already did your introduction. it was great, by the way. >> thank you. my mother will appreciate it. actually, you thought they were teasing about the latest information. this is -- hang on a second. somebody literally did just come through although you have just been listening to senator shelby. hang on a second, here. why are we not working here? ok. yo h for having
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me. you know t ay iz t when i started my business, my cook political report, 26 years ago, it was with my $6,000 out of the senate retirement fund and a $10,000 loan from a small community bank in mississippi that my father-in-law -- [applause] >> my father-in-law cosigned it. i'm not sure -- who's here from mississippi? anybody? no, no. i'm not sure the bank of holidale, mississippi exists. they got paid off, i'll assure you that. that would be interesting to do a survey of american business and find out, okay, when you first started where did you get your first money? and my guess is the folks in this room and your predecessors are responsible for a whole lot of those loans.

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